I consult with dozens of CEO’s from start-up’s to 20 years old small businesses, many of them have the same problems.

1. How do I get access to capital? (click here to review)
2. What do my financials really mean to me?
3. How do I position myself in the market?
4. How do I grow my revenue?

One could say that all businesses have more than one of these same problems. True, but small businesses make up the vast majority of the US economy and their issues tend to carry a huge weight on our daily lives. According to surveys 99% of US employers have less than 500 employees. Most of my established businesses have less than 20 employees and generate less than $2,000,000 in annual revenue. As a SCORE Mentor and Chapter Board Member I help my clients deal with these issues every week.

In this article I’ll just discuss Problem #2 – Understanding Financials.

Small business CEO’s are best served by using financial management software right from the very start, for example QuickBooks. By using this type of software either by an employee or through an outside accounting firm, the CEO automatically gets important financial reports, the company’s “Financials”. The first step in “Understanding Financials” is to actually have access to them.

The issue I stress is that a CEO doesn’t need to become a “CPA”, however understanding financials, helps; a) spot trends, b) manage more effectively, and c) grow the business. The focus is to understand enough to analyze and take action. A great deal of “actionable” information can be gained by strategizing how your financial information is initially set-up.

The Income Statement
Understanding the Income Statement or Profit & Loss statement (P&L), is probably the 2^nd most important report, after Cash Flow and Cash Forecast reports. I encourage CEO’s to start their business using Accrual Basis accounting vs. Cash Basis. Although the IRS allows small businesses to choose a method, starting with accrual or “modified cash” shows a much better view of a business’s performance. Besides, using something like QuickBooks makes this easy.

The very top of the P&L is Revenue and Cost of Goods (COGS). I suggest the segregating of revenue as much as possible and its associated costs of goods where possible. For example, in a services business track revenue and costs by various types of services, and then further separate out all product sales. Therefore when running reports you can easily see, at least, gross profit by type of service(s) and product(s). The ability to accurately determine costs that is unique to revenue vs. general business overhead is quite important. You want to potentially include directly related costs to “Cost of Goods”, vs. Expenses.

I tell my CEO’s the “best” kind of revenue is “reoccurring”, sell or contract once, enjoy it monthly. When possible find ways to provide on-going, auto renewing, contracted services. In a former business about 65% of my total revenue was “reoccurring”, enough to cover all business expenses except sales and marketing. We’ll talk more about this in a future article on “positioning a business”.

The income statement is somewhat meaningless, unless you also have a budget to compare to. Each line item should have a predetermined budget amount. The budget is normally done annually and the monthly portion is shown on monthly financials, similar with Year to Date (YTD). Comparison to budget, is “actionable” information, why are we over or under, what can we do about it.

The bottom half of the P&L is Expenses. The goal in every business is to continually manage and lower expenses as a percentage of revenue. A dollar saved in expenses is worth more than an extra dollar of revenue. The biggest single expense category in most businesses is payroll costs (salaries, taxes, insurance etc.). As business grow they need to add employees, managing this expense is the single biggest lever available to a CEO. Here’s a tip, unless you are in a really fast growth business, do not “let expenses chase revenue”.

Balance Sheet
For all practical purposes, CEO’s need to initially understand only a few items on the Balance Sheet (B/S). A Balance Sheet merely shows Assets, Liabilities and Paid In Capital (Owner Equity). Three items are most critical on a B/S: Cash – Asset, Accounts Receivables (A/R) – Asset and Accounts Payable (A/P) – Liability. Cash is exactly what is in your checking or other business accounts at the end of the accounting period. A/R is the total amount owed by customers, and A/P is money you owe vendors for products or services they have already provided billed or unbilled (accrued costs). Keep in mind that whereas cash is easy to understand, A/R and A/P need further analysis, that’s why they are “aged” on a separate report. The longer out on an aging report the A/R and A/P is, the more trouble you are in. Unless you have very unique business requirements, A/R should be kept as current as possible. If you are carrying accounts more than 30-60 days you have issues. In my past business I changed my terms of sale and specified ACH Debit as my standard method of payment, over 80% of my billings were paid in the month billed. One would look at my AR month end report and think we were in trouble, not so, it was all turned to cash.

That are the two biggest factors that affect AR? First, how you “train” your clients. If you allow them to pay in 60 – 90 days they will take advantage of you. If you call them 1 day after the due date they will get the message. Secondly, happy customers are much more likely to pay on-time. You can’t “make them happy”, but you can treat them really well, they’ll probably decide on their own to be happy.

Cash Flow Forecast
You notice that I’m not referencing a Statement of Cash Flow, but a forecast here. Yes, a cash flow statement is a very important tool, but it is “yesterday’s newspaper” by the time your read the report, it is too late to take action. For small company CEO’s, more important is your forecast for future cash requirements, usually in a spreadsheet format. You can easily build the cash forecast from both the statement of cash flow and your budget. It is a whole lot more comfortable for a CEO to have 3-4 months of cash on hand than to continually worry about making payroll.

The bottom line is that it is important that CEO’s of small businesses understand the key elements of their financials. Getting consulting services from SCORE or a business advisor may help you in your efforts. Once a CEO has a sufficient level of financial understanding he/she can focus on other key areas of the business. In future articles I’ll cover the remaining 2 Problems shown above.

You can research our Florida SCORE chapter here: https://pascohernando.score.org/

   I consult with dozens of CEO’s from start-up’s to 20 years old small businesses, many of them have the same problems.

1. How do I get access to capital?
2. What do my financials really mean to me?
3. How do I position myself in the market?
4. How do I grow my revenue?

One could say that all businesses have more than one of these same problems. True, but small businesses make up the vast majority of the US economy and their issues tend to carry a huge weight on our daily lives. According to surveys 99% of US employers have less than 500 employees. Most of my established businesses have less than 20 employees and generate less than $2,000,000 in annual revenue. As a SCORE Mentor and Chapter Board Member I help my clients deal with these issues every week.

In this article I’ll just discuss Problem #1 – Access to Capital.

The number one reason small businesses fail is lack of capital. Most often this starts right from the very beginning when the CEO completely underestimates his/her cash flow needs for the first 18-24 months. I ask my clients to completely focus their initial understanding of financials on cash. Simply, do you have enough in your checking account to pay the bills? Developing a simple business financial plan showing revenue and expenses will help start the cash flow analysis, but as they soon find out “revenue might not mean cash”. This is often the case when a business extends payment terms, I’ll provide the products or services today and I’ll bill you tomorrow. Then guess what, the customer is slow to pay their bills and the new business owner learns a new term “accounts receivables” (A/R). The best “Access to Capital” is to get paid either in advance or immediately as the product or service is provided. In my former business, even dealing with larger institutions our standard method of payment was ACH debit, monthly. A/R was a bad “asset, I wanted cash. This, by the way, worked well and we were always flush with cash.

From a practical point of view, my smallest clients rely on good old fashion business credit cards to either provide 30 days of float or on-going credit, albeit at very high rates. They quickly learn that banks will provide them with 0% interest for say 12 months or so for either opening a new account or transferring an existing credit card balance over to them. Credit cards also provide both and audit trail and potential purchase discounts in the form of points or cash back.

Once a business gets established I encourage them to start working on a Line of Credit, specifically a Revolver. In a regular LOC, once the extended credit is paid down, it is not replenished and is therefore paid-off over a term. A RLOC, set’s a maximum amount and the company can draw against it “at will” as it makes payments. Most often a bank will ask for security to protect the RLOC, such as pledging assets or personal guarantees. Interest rates can be friendly based on the health of the business. A RLOC will require you to have a good set of financials and a relationship with the institution.

Most small businesses find it difficult to secure outright bank loans these days. Don’t misunderstand, banks in the US are sitting on huge stockpiles of cash, but are not willing to take the risk lending it to small businesses. The larger the business, more banks are will to lend to them. Large national banks fight over companies like Apple, Google and 3M, they offer low rates and highly customized services.

There are however avenues available for small businesses. For example, in my area we have Micro Loans available through the Pasco Economic Development Council (PEDC). In this case a small business works with a SCORE Mentor to develop a business and financial plan and fill out the required application that can then be submitted to the PEDC. The PEDC Loan Committee then meets with the small business to better understand their situation. Currently these loans can range up to $35,000 over 72 months at attractive interest rates.

Another source of business loans is the SBA, Small Business Administration. Although the SBA does not make loans directly to a business, they do act as a facilitator with SBA approved banks and other financial institutions. In many cases the SBA will guarantee the loans, usually the SBA is used if the business can’t qualify for traditional bank loans. Sometimes all the small business needs is a Surety Bond for example a contractor trying to bid on a job, the SBA can help with this. CEO’s looking for SBA loans can often just use the SBA LINC web site, answer a few business questions and start the process all on-line. One final comment about SBA loans, this is a government program and is subject to constant changes and modification of the rules. Not all banks partner with the SBA and provide these type of loans. In addition finding a bank and securing a SBA loan can take quite a bit of time.

The bottom line is that it is difficult for small businesses to receive access to credit to start or grow their businesses. Getting consulting services from SCORE or a business advisor may help you in your efforts. Once a CEO gets to a sufficient level of cash flow, the goal is to stay ahead of the curve. In future articles I’ll cover the other 3 Problems shown above, they too reflect back on Problem #1 – Access to Capital.

You can research our Florida SCORE chapter here: https://pascohernando.score.org/

Investors looking for higher yields in this stagnate market may want to understand how closed end funds work and how they differ from Mutual Funds and ETF’s. See my current CEF holdings at the end of this article.

Summary:

1. Closed end funds are quite different than Mutual Funds (open end funds). A CEF raises a fixed amount of money and issues a fixed number of shares. A Mutual Fund continues to raise money and adds shares as people invest.
2. CEF’s typically are used by institutions and private investors as a way to generate steady income.
3. CEF’s typically trade at a discount to their Net Asset Value, NAV. This offers investors enhanced potential gains. Mutual Funds are revalued each evening to their NAV.
4. All CEF’s are actively managed, most Mutual Funds are tied to an index and are much more passive.
5. A CEF trades just like a regular stock, bid/ask pricing, this means that market demand determines the price. A Mutual Fund determine an actual price at 4 PM each day as the market closes. CEF’s tend to be much more transparent.
6. A CEF’s actual holdings portfolio might be almost identical to an ETF or Mutual Fund portfolio.

Details:
A closed-end fund is a publicly traded investment company that raises a fixed amount of money through an initial public offering (IPO). The fund then trades its fixed number of shares like a regular stock in the market. CEF’s normally have a specialized portfolio of securities and all have active investment advisors.

Let’s compare a Mutual Fund with a CEF in our current market. If there is a market panic, investors may sell any particular stock or segment of stocks in masse. With a huge wave of sell orders and needing to raise money for redemptions, the manager of an Mutual Fund may be forced to sell stocks he would rather keep, and keep stocks he would rather sell, because of liquidity concerns (selling too much of any one stock causes the price to drop disproportionately). By comparison an investor pulling out of a closed-end fund must sell it on the market to another buyer, so the manager need not sell any of the underlying stock.

Closed-end funds are designed to pay investors a set monthly or quarterly distribution. With more and of us either reaching retirement age or retired, a steady income stream is increasingly important. Since the CEF is market price driven, not necessarily the NAV, unlike Mutual Funds. For example, a CEF with a 10% discount to NAV means a CEF is paying you 10% more than you would get if you bought the same stock portfolio directly. You can buy a $1,000 worth of stock for only $900, and get a healthy dividend.

My current CEF’s:

BSL
Blackstone/GSO Senior Floating Rate Term (BSL) sells for a 4% discount to NAV. With a current yield of 7.5% and a maturity of 4 years due to mandatory liquidation in 2020. Therefore Blackstone/GSO Senior Floating Rate Term (BSL) has an effective yield to maturity of nearly 12%. With this great dividend and a fixed repayment date, this can be an attractive place to ride out a rough market while waiting for interest rates to rise. This CEF pays dividends monthly.

JPC
Nuveen Preferred Income Opportunities Fund invests in Preferred Stock shares, another of my favorite, conservative sectors. It trades at a 1% discount to NAV and generates 8% yield. This CEF pays dividends monthly.

BUI
BlackRock Utility and Infrastructure Trust (BUI): I like this CEF because no matter who wins the election in November, the demand for water, energy and improved roads and bridges will keep need to be addressed. This CEF sells for a 1% discount to NAV and has a 7% yield. This CEF pays dividends monthly.

On my shopping list is:

GAB
Gabelli Equity Trust GAB) is has very diversified portfolio. It has a 11% yield and sells at a 4% discount to NAV. It top 10 holdings are pretty blue chip, Rollins, Honeywell, MasterCard, Swedish Match, Cablevision, Berkshire Hathaway, Twenty-First Century Fox, American Express, Genuine Parts and O’Reilly Automotive. This CEF pays dividends quarterly.

The stock market has been very volatile for the last 12 months. So, what is a nice safe investment to add to your portfolio that will provide high yield income?

REIT’s – Real Estate Investment Trusts

A REIT is a way to invest in real estate without actually owning the property. A REIT is a company that owns and operates income generating real estate. REITs can own commercial properties from office and apartment buildings to hospitals, retirement homes, warehouses, hotels, shopping centers, cell phone towers and timberlands. REITs are also a major factor in financing the housing market. REIT, similar to BDC’s pay little or no corporate income tax and must distribute at least 90 percent of taxable income as dividends to investors. This results in many cases in both capital growth and high-yields. REIT’s trade just like stocks.

There are two basic types of REIT’s Equity REITs and Mortgage REITs. An Equity REIT owns property like office buildings, shopping malls, hotels, warehouses, hospitals, etc. A Mortgage REIT invests in mortgages of property.

According to a study, nearly half of all publicly traded REIT shares are held in pension plans and retirement accounts. Public and private pension plans and 401(k)s account for 29.1 percent of REIT shares, while investors with IRAs hold an additional 18.1 percent of REIT shares.

The performance of a REIT follows the real estate market more closely than it follows the stock market. Dividends are taxed at the same rate as income, so the higher dividends mean you will likely pay more taxes unless you hold them in a tax-deferred account like your IRA or 401K.

On September 1, 2016 Real Estate will become a separate sector in the S&P, previously RE was grouped in with Financials and had very little visibility. Mutual funds will be buying REIT’s ahead of this change to make sure they are positioned to hold some of the new index.

I’ll also warn you that like all other high-yielding investments that are subject to the volatility of changing interest rates, REIT’s can be also. In general REIT’s won’t be effected too much as long as rates don’t rise quickly.

Here are my current REIT Holdings (about 5-6% of my portfolio):

Hospitality Properties Trust (HPT) Healthcare  7.81% yield

HCP, Inc (HCP) Healthcare   6.88%  yield

American Capital Agency (AGNC)  MReit 12.53% yield

Annaly (NLY)  MReit  11.15% yield

Stag Industrials (STAG)  Industrial Warehouses 6.28% yield

Realty Income Corp (O)  3.92% yield  Triple Net REIT, ***** Great Capital Appreciation ******

Great web site: http://www.dividendyieldhunter.com/

I also follow http://seekingalpha.com/   Brad Thomas, research analyst and he currently writes weekly for Forbes and Seeking Alpha where he maintains research on many publicly-listed REITs.

Summary

1. Everything has changed in retirement planning in just the past few years.
2. Formerly financial planners would recommend “laddered bonds” that would allow you to have a steady income stream with little risk.
3. Bonds worldwide no longer pay the interest necessary to support the typical 4% retirement drawdown many people need to retire. Some bonds pay negative interest.
4. The situation may not change in the next 10 years.
5. There are alternatives, but you need to understand them.

Today, the 10 year US Treasury is paying about 1.8%, a very far cry from 5% – 15% they paid from 1968 to 2009. Even at 1.8% the US 10 year is viewed as very attractive to the rest of the world when many bonds are paying much less or negative yields.

For an entire generation, financial planners helping people develop their retirement plans counted on bonds to provide not only safety but also fixed income. The planner would suggest “laddering” bonds or even high yield CD’s. Many time they would just put you into bond mutual funds that did the laddering for you automatically. Laddering meant that you would start by buying say a 1 year bond, a 5 year and a 10 year bond or Treasury note. When the 1^st bond expired you would just roll it over into a 2nd bond, etc. This way every few years you had a bond expire (called away) and you could hopefully buy the next one at higher rate. If you owned enough bonds with different maturity dates you could count on a steady stream of income that allowed you to draw down your 4% a year and still accommodate for inflation. This was the most recommended and preferred retirement investment strategy. This doesn’t work anymore. Here is what the 10 Year Treasury yielded from 1950 to 2016.

Today however, with such a low bond yield worldwide there is new generation of retirees that are either retired today or will retire in the next 10 years that are searching for a new financial plan. Economist are now saying that we should prepare ourselves for 10 years of relatively low yields, say 1.5% – 3%.

The problem is that the 4% draw down model does not work with 1.5% – 3% yields and 1-2% inflation. You run out of retirement income way too early. Even if you follow a more aggressive investment model of 60% bonds 40% stocks and bonds stay in the 2-3% range you need huge returns on stocks to hit your 4% goal.

Here is the problem for the next 10 years. Notice the downward trend in 10 year yields and a new base being established in the 1.8 – 3% range.

What can you do?

1. Assume you need to maintain a 4% draw down rate in retirement, you probably need a consistent 6-7% yield/growth on your investments to accommodate for inflation.
2. Always remember bond yields move directly opposite from bond prices.
3. The key is to substitute “bond like” equities that offer higher yields for traditional bonds.
4. Plan on maintaining a higher equity (stocks) proportion of your portfolio well into retirement. Today you could easily be in you 80’s and still have a 50/50% bond/stock portfolio. In past years at 80 you would own 100% bonds and CD’s.
5. Continue to fine tune your financial retirement plan, you will live longer than you think, you need to be debt free in retirement and you need to manage expenses.
6. If you develop a good plan and pay attention to it, you can retire comfortably and sleep at night knowing you can meet your goals.
7. Your plan might be to spend all your money before you die, or leave a legacy (money) to your loved ones for them to enjoy.

In a future article I’ll provide some suggestions on how to build a 6-7% yield/growth portfolio.

This is the very best tax shelter there is, if you qualify. A HSA, Health Savings Account is the only triple tax-advantaged program in the whole IRS tax world. You are able to put in pretax contributions, you are able to enjoy tax-free compounding, as long as the money stays inside of the HSA. Then you are able to enjoy tax-free withdrawals for qualified healthcare expenses. It doesn’t get any better than that.

So how do you get one and how much can you contribute? The first requirement is that you have some type of high-deductible healthcare plan, and the IRS has specific rules defining these plan. Therefore if you have a HDHP, you are eligible to contribute to an HSA. In 2016 the contribution limit is $3,350 for single filers or for single individuals participating in HDHPs. And $6,750 for people who are part of a family plan.

You can of course use your HSA to pay day to day medical expenses. However, the tax advantage is to pay your medical expenses out of pocket if you can afford it, deduct them on your taxes and accumulate your HSA for the future. When you reach age 65, your HSA functions like an IRA. So, if you are using the money for qualified healthcare expenditures those withdrawals are all tax-free. If you are using the money for other things beyond healthcare expenses those withdrawals are taxed at your ordinary income-tax rate. Keep in mind that this can be reimbursed back to you for your Medicare costs each year.

If you can stay healthy the HSA can be a savings account that you can hold onto for many years. You can just fund the HSA to the extent that you possibly can, and then leave the money in your HSA to compound for your use during retirement. This compounding will take place if you have your money in a HSA account that allows you to invest in stocks or bonds, similar to your IRA account.

One problem many people contributing to HSAs face is that their employer-provided HSAs are just bank accounts and have no provision for investing. There is however a workaround, just go ahead and contribute to that employer-provided HSA. Have your pretax contributions come right out of your paycheck and into their HSA, and then periodically throughout the year, you can transfer the HSA assets from their HSA provider account to the HSA account of your own choosing (one that allows investing). Keep in mind that if you don’t have employee health insurance you can get an Obama Care HSA private insurance plan and just set up the HSA at a private bank or institution. In this case your HSA contributions are 100% credited on against your income on your 1040 tax return, along with the other benefits mentioned above. The bottom line is that if you qualify for an HSA, you want to be able to not just save but invest the money in your HSA account.

If you qualify for an HSA it can be a great tax shelter.

To many people the decision on when to start taking Social Security can be a difficult decision. As we all know those that can claim Social Security may start getting benefits as early as age 62, or as late as age 70. So how do you decide when you should take yours? This actually turns out to be a Year by Year decision.

The first decision is, “Do I absolutely need the money to live on, with few other options”, if so then go ahead and start receiving benefits at age 62. However, you should also consider the idea that the longer you wait, the more you get and the difference is substantial.

Let’s look at some examples.

If you are an unmarried person, currently age 61 and trying to decide whether or not to claim Social Security at 62, you can compare claiming at 62 vs. claiming at 63. Based on a calculation the breakeven point is age 78. (If you live to age 78, you are better off having claimed at 63 than having claimed at 62.)

Using the 2011 actuarial tables from the SSA, we can calculate that for an average 62 year old male, there is a 67% probability of living to age 78. For a 62 year old female, there is a 76% probability. For most unmarried people, it makes sense to wait at least until 63, because there is a much greater than 50% probability of living to the breakeven point.

Then, at age 63, you would want to see if it makes sense to wait until 64. The breakeven point between claiming at 63 and claiming at 64 is age 76. Using the same actuarial tables, we can calculate that for an average 63 year old male, there is a 74% probability of living to age 76. For a 62 year old female, there is an 82% probability. It probably makes sense to wait another year.

And then you would repeat this analysis every year. For somebody with a full retirement age of 66, the year-by-year breakeven ages would be as follows:

Full retirement 66

 Full retirement 67

The above analysis is just a simplification, to show the general idea that the decision should be made year-by-year rather than simply asking “Should I claim at 70 or at 62?”

A real-life analysis of your situation could include a few other factors, such as:

• What would my returns be if I invested my on early-received benefits? In the above discussion I assumed a 0% real return, just a match for low inflation. This can be determined by just looking at the yields on TIPS, (the investment with a risk level most similar to that of Social Security), they are currently at or near zero, a pretty reasonable assumption. If real interest rates were higher, the breakeven points would be pushed back a little bit.
• There is a BIG difference in the actual cash payout between the years and the early claiming penalty is substantial. Keep in mind that Social Security gains a guaranteed 8% a year, tax free if you wait from “full retirement age” to age 70. That is excellent in this market.
• Tax planning can be an issue. Specifics vary from person to person, but in most cases tax planning is a point in favor of waiting to claim benefits, because of Social Security’s tax-advantaged nature.
• Spousal and survivor benefits for married couples can make a big difference.
• For anybody who is concerned about running out of money due to a very long retirement, delaying Social Security is often a good decision, even if there is a less than 50% probability that they will live to the breakeven point in question.

What should you do? If you think you are going to live into your 80”s, which has a high probability, they longer you wait, the more money you’ll have to live on.

Here is another interesting article on the real value of Social Security as if it were a bond!

Choosing individual stocks that you can “buy and hold” for growth is always a challenge. You need to have a great reason to choose each stock for your portfolio, and then make sure the story doesn’t change.

Even in a flat or slightly down market you can still have great stocks making 52 – week highs. 14 of my 66 stocks hit new 52 week or all-time highs this week, and the market was quite weak.

Altria (MO) – Very long time holding, 4% at costs bond like yield

AMN HEALTHCARE SERVICES (AHS) – My favorite stock last 2 years, all-time high

Amazon (AMZN) – Bought in February 40% gain, all-time high

Constellation Brands (STZ) – My favorite stock last 2 years, all-time high

Facebook (FB) – Bought at $70, now $119 in 2 years, all-time high

Home Depot (HD) – Very long time holding, all-time high

Johnson & Johnson (JNJ) – Very long time holding, nice dividend, all-time high

Lockheed Martin (LMT) – Very long time holding, all-time high

Martin Marietta (MLM) – Bought March 2016, all-time high

McDonalds (MCD) – Bought in December, all-time high

3M (MMM) – Very long time holding, all-time high

Nvida Corp (NVDA) – Bought at $20 in 2014 now $40, all-time high

Nuveen Preferred (JPC) – 8% yield CEF bond like yield

Raytheon (RTN) – Long time holding, all-time high

Just so that you don’t think that all of my stocks are 52 – week winners I had 4 core holdings that hit 52 – week lows this week:

American Airlines – Still up over 30% since purchased, I’ll keep for awhile

Apple – Core holding forever

Gilead Sciences – Core holding, but I’m down about 10%, has lots of cash

Under Armour – Core holding, still up 18%, should rebound big in 12 months

Many active investors only “buy stocks by going long” and at some later date they sell. However, traders really don’t care if they buy or “sell short”, as long as they make money.

Many times there are just obvious opportunities to “short” a stock and make fast money in just a few days. Here is an example from this week. Retail companies have been reporting poor earnings this last week, all the talking heads on CNBC have been agreeing that retail will report lower revenue and profits for the quarter.

Therefore I took a quick look at Macy’s (M), saw that it has already been weak and decided it was an obvious “short” opportunity. On Monday, May 9^th I “shorted” 300 shares of Macy’s at, $37.80 my cost was $11,384.

Here is what the transaction looked like in my Fidelity account.

This morning before the market opened, I added a limit “Buy to Cover” order for M at $34.00.

Here is what the order looked like:

As expected Macy’s reported earning this morning and as expected they were terrible, the stock crashed and my stock automatically sold as the market opened at $33.84. I made a profit of $1,232 in two days on a very low risk simple, obvious trade. Shorted cost $11,384 bought back for $10,152, profit $1,232.

I could have sold short much more than this but I never get greedy.

Smart investors aren’t afraid to “short” stocks that are going down just as often as they buy stocks to go long.

Mother’s Day is just two days away and I thought it would be appropriate to post some financial suggestions just for Mom’s. If you are a mom and completely control your own finances in your family, well congratulations, you may not need any of this advice. However, many women might be similar to my family and my parents where the “man” in the family “handles’ all that financial and tax stuff and the mom’s aren’t really involved. Women these days can be very busy and as duties may be allocated to another spouse their need for financial understanding is critical.

Here are my Mom’s Suggestions:

1. Get involved, at least to the point where you have an accurate and updated list of all financial matters within the household. Check out the “In Case of Emergency Document” article I last updated HERE. I literally update this document monthly, there are always new debit card numbers, new services you sign up for and so forth. Your income tax planning changes almost every year. Every few months I quickly review this document with my wife and adult daughter. God forbid something happens to me I want them to be as prepared as possible, with step by step instructions and all the details required to carry on their lives. This is the biggest gift I can give them.
2. Since many women work these days and most have company 401K plans or personal IRA’s. It is imperative that you designate the proper “beneficiary” on these plans. Always keep it up to date as situations change in life. A very common mistake is to just think that you already have a will or estate plan and you don’t need to name a beneficiary. Please keep in mind that the named beneficiary on a 401K plan takes precedent over any instructions in a will or estate plan. If you don’t have a simple will get one immediately! You just can’t be a mom and not have a will. If you have special needs children, or special situations in your family, you may want an estate plan that includes a Revocable Living Trust, individual Wills, Durable Powers of Attorney and Healthcare Surrogate. Here is more information on that topic.
3. Save and Invest. Learn how to make financial choices. Develop a budget that includes not only expenses but a savings and investment plan. I can assure you, nobody cares more about your money than YOU. You can trust your spouse, a relative, paid advisor or friend to help but no one cares like you do. I have friends that wanted to be “safe” and went to well-known national banks and found a financial “advisor” to help them manage their investments. In almost all cases they were not only disappointed, but in many cases lost a fair bit of money. There are really simple thinks moms can do to completely protect their investments, just take warren Buffet’s advice, put your money in an inexpensive S&P 500 Index fund or ETF and leave it there. You will automatically beat 90% of the “talking heads” on TV that are stock market “experts”. For example, Schwab® S&P 500 Index, or Vanguard Total Stock Mkt Index.
4. Get out of debt and stay that way. The single biggest reason why people struggle financially is not because of their income or routine expenses, it is because or huge interest payments on debt. Forget about the stock market or any other investment, NOTHING pays you anything remotely close to the costs of debt. Credit cards charge you 20+% if you carry a balance. Car loans, consumer loans etc. can carry very high interest rates. Pay off all credit card debt and other loans BEFORE your next vacation, or wardrobe “enhancement” shopping trip. Here is more on debt reduction.

 To all the mom’s out there HAPPY MOTHERS DAY!